Developing analytics for your AP team

March 9, 2017 Chris Doxey

Developing analytics for your AP team

Metrics are typically implemented not only to measure a process but to establish goals and to implement action plans for process improvements. Metrics should be established and agreed upon by the business process owners. They should also be well-organized, as automated as possible, and meaningful to the process.

As a best practice, data should be obtained from ERP systems directly—not manually. This approach accommodates accuracy, timely reporting, and ongoing analytics.

Simply put, metrics help determine trends, forecasts, spikes, and benchmarking goals.

Challenges with AP Metrics and Analytics Programs

The challenges with many AP metrics and analytics programs have common themes across several companies and industries:

  1. Several data sources compounded by disparate data silos
  2. Few and limited analytics (too small a data set to draw intelligence from)
  3. Far too much analytics (excessive data that results in an over-analysis or an inability to make a decision)
  4. Poorly calibrated metrics

Defining AP Analytics

Metrics are best organized in a scorecard format so management can focus on results and determine what to analyze.

Which brings us to the topic of developing analytics for the accounts payable process. Here is a scorecard that can be used to clearly define objectives to which to base analytics in AP:

Objectives by Process

Section 1 – Supplier Master Set-Up
Number of Active Suppliers on the Supplier Master
Number of Duplicate Suppliers
One Time Supplier Usage
Percentage of Suppliers Screened Against OFAC
Percentage of W9s with TIN Match Exceptions
Section 2 – Invoice Processing
Non-Purchase Order Invoices
Days Payable Outstanding (DPO)
Percentage of Invoices Paid Within Terms
Percentage of Invoices Paid Early
Number of Manual Invoices
Number of E-Invoices
Section 3 – Customer Service
Time to Resolve a Supplier Issue
Number of Supplier Calls
Number of Emergency Payments
Aging of Outstanding Debit Balances
Section 4 - Disbursements
Number of E-Payments
Percentage of Duplicate Payments
Section 5 – Internal Controls and Compliance
Percentage of Duplicate Payments Prevented Monthly/Quarterly
Number of Self-Assessments Performed Quarterly
Section 6 – Research and Remediation
Time to Resolve a Supplier Issue
Outstanding Clearing Account Balances
Aging of Clearing Account Variance
Aging of Outstanding Debit Balances
Total Cost of the total AP Function as a Percentage of Revenue
Total Cost of the Accounts Payable Function as a Percentage of Revenue
Number of FTEs in the total AP Function
Number of FTEs in the Accounts Payable Function
Section 7 - Accounting, Reconciliation, and Month End Processes
Cycle Time for Completing Monthly Accruals
Aging of Clearing Account Variance
Aging of Outstanding Debit Balances

Objectives by Impact

Section 1 - Payment
Total Cost of the total AP Function as a Percentage of Revenue
Total Cost of the Accounts Payable Function as a Percentage of Revenue
Number of FTEs in the total AP Function
Number of FTEs in the Accounts Payable Function
Non-Purchase Order Invoices
Section 2 – Transactional Quality
Days Payable Outstanding (DPO)
Percentage of Invoices Paid Within Terms
Percentage of Invoices Paid Early
Outstanding Clearing Account Balances
Aging of Clearing Account Variance
Section 3 – Customer Service
Time to Resolve a Supplier Issue
Number of Supplier Calls
Number of Emergency Payments
Aging of Outstanding Debit Balances
Section 4 - Controls and Compliance
Cycle Time for Completing Monthly Accruals
Number of Manual Invoices
Number of E-Invoices
Number of E-Payments
Number of Self-Assessments Performed Quarterly
Number of Active Suppliers on the Supplier Master
One Time Supplier Usage
Number of Duplicate Suppliers
Number of Duplicate Payments
Percentage of Suppliers Screened Against OFAC
Percentage of W9s with TIN Match Exceptions
Percentage of Duplicate Payments Prevented Monthly/Quarterly

Objectives by analytics category

Section 1 – DPO and Invoice Processing
Non-Purchase Order Invoices
Days Payable Outstanding (DPO)
Percentage of Invoices Paid Within Terms
Percentage of Invoices Paid Early
Number of Manual Invoices
Number of E-Invoices
Section 2 – Payment and Risk Management
Number of Self-Assessments Performed Quarterly
Number of Emergency Payments
Aging of Outstanding Debit Balances
Percentage of Duplicate Payments Prevented Monthly/Quarterly
Section 3 – Operational Analytics
Time to Resolve a Supplier Issue
Number of Supplier Calls
Cycle Time for Completing Monthly Accruals
Aging of Clearing Account Variance
Aging of Outstanding Debit Balances
Time to Resolve a Supplier Issue
Outstanding Clearing Account Balances
Aging of Clearing Account Variance
Aging of Outstanding Debit Balances
Total Cost of the total AP Function as a Percentage of Revenue
Total Cost of the Accounts Payable Function as a Percentage of Revenue
Number of FTEs in the total AP Function
Number of FTEs in the Accounts Payable Function
Section 4 – Supplier Master
Number of Active Suppliers on the Supplier Master
Number of Duplicate Suppliers
One Time Supplier Usage
Percentage of Suppliers Screened Against OFAC
Percentage of W9s with TIN Match Exceptions
Percentage of Duplicate Payments

Analytics, then, is the cream to AP's data—the good stuff, insights, rises to the top. Defining the right AP metrics can set the foundation for your accounts payable analytics initiative.

 

Go far with with the right AP tools

 

About the Author

Chris Doxey

Chris Doxey, CAPP, CCSA, CICA is an independent management consultant providing Internal Controls and Business Process Best Practice Solutions. She has extensive experience in accounts payable, procurement, internal auditing, internal controls, Sarbanes-Oxley compliance, payroll, logistics, financial systems strategy, and financial integration at Digital, Compaq, Hewlett Packard, MCI, APEX Analytix, and Business Strategy, Inc. She was recruited to assist MCI (formally WorldCom) recover from their internal control challenges. She has a bachelor's degree in English, a bachelor's in accounting, a master's in business administration, and a graduate certificate in project management. Chris has written numerous articles and published two handbooks: AP Leadership Skills and Implementing a Controls Self Assessment Program for Your Accounts Payable Department.

More Content by Chris Doxey
Previous Article
Developing Analytics and Tools for Your Procurement Team
Developing Analytics and Tools for Your Procurement Team

When developing analytics and tools for your procurement team, the chief procurement officer (CP...

Next Article
Weekly Ledger 36: Top Stories in Accounting and Finance
Weekly Ledger 36: Top Stories in Accounting and Finance

Here's what's trending this week... Silicon Valley Tried to Upend Banks. Now It Works With Them

×

Learn more through our weekly email digest

Thank you!
Error - something went wrong!